10-QPeriod: Q2 FY2017

UNITED PARCEL SERVICE INC Quarterly Report for Q2 Ended Jun 30, 2017

Filed August 3, 2017For Securities:UPS

Summary

United Parcel Service (UPS) reported solid financial performance for the second quarter of 2017, with consolidated revenue increasing by 7.7% year-over-year to $15.75 billion. This growth was primarily driven by strong volume increases across all segments, particularly in U.S. Domestic Package operations, fueled by robust e-commerce and business-to-consumer shipments. Operating profit saw a healthy increase of 8.7%, reaching $2.22 billion, indicating effective cost management alongside revenue growth. Net income also rose by 9.1% to $1.38 billion, translating to diluted earnings per share of $1.58, up from $1.43 in the prior year's quarter. The company continued its strategic investments in network capacity and technology improvements, which are expected to enhance operational efficiency and reliability. Despite increased operating expenses, largely due to higher compensation and benefits, purchased transportation, and fuel costs, UPS demonstrated its ability to manage costs and leverage its network effectively to drive profitability. The company also actively managed its capital structure through share repurchases and dividend payments.

Financial Highlights

53 data points
Beta

Revenue

$15.93B

Net Income

$1.38B

8.7% Net Margin

EPS (Diluted)

$1.58

Total Assets

$39.72B

Cash & Equivalents

$3.54B

Free Cash Flow

$1.31B

Financial Statements
Beta
Revenue$15.93B
Operating Expenses$13.89B
Operating Income$2.04B
Interest Expense$111.00M
Net Income$1.38B
EPS (Basic)$1.59
EPS (Diluted)$1.58
Shares Outstanding (Basic)872.00M
Shares Outstanding (Diluted)876.00M

Key Highlights

  • 1Consolidated revenue increased 7.7% to $15.75 billion in Q2 2017.
  • 2Operating profit grew 8.7% to $2.22 billion, with operating margin improving to 14.1%.
  • 3Net income rose 9.1% to $1.38 billion, and diluted EPS increased to $1.58.
  • 4U.S. Domestic Package segment revenue increased 8.1%, driven by strong e-commerce volume growth.
  • 5International Package segment revenue grew 2.8%, despite unfavorable currency impacts.
  • 6Supply Chain & Freight segment revenue saw a significant increase of 12.0%, boosted by acquisitions and improved demand.
  • 7Capital expenditures were substantial at $2.01 billion for the six months ended June 30, 2017, reflecting investments in infrastructure and technology.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in average daily package volume across all segments, up 5.0% year-over-year, propelled by strong e-commerce and business-to-consumer shipments. Higher revenue per piece, influenced by base rate increases and fuel surcharges, also contributed positively.

Currency fluctuations had an unfavorable impact, particularly on the International Package segment. While revenue for this segment grew 2.8%, currency impacts resulted in a reported revenue decrease of 5.5% and a decrease in operating profit of $114 million for the quarter. The Supply Chain & Freight segment experienced a smaller, neutral currency impact on operating profit.

Operating expenses increased primarily due to higher compensation and benefits costs, which rose 4.7% due to wage increases, headcount growth, and increased multiemployer plan contributions. Purchased transportation costs (up 18.0%) and fuel costs (up 22.0%) also contributed significantly to the increase, driven by higher volumes, fuel prices, and increased usage of third-party carriers.

UPS continued to invest heavily in capital expenditures, with $2.01 billion spent in the first six months of 2017, primarily on facilities, aircraft, vehicles, and IT, to enhance network capacity and efficiency. The company also continued its share repurchase program, spending $898 million in the first six months of 2017, and maintained its commitment to returning capital to shareholders through dividends.